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Optimizing Your 403(b) Plan: New Changes and Guidelines for Employees & Retirees

This document outlines significant updates and processes regarding the Hope 403(b) retirement plan, including current plan assets, fee structures, and the importance of selecting new funds by September 1, 2013. With a total asset base of over $121 million, the plan encourages active participation through informed decision-making and consideration of institution-driven investment options. Key steps include evaluating current funds, creating an investment policy, and selecting a record-keeper, ensuring compliance with federal regulations and prioritizing low fees.

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Optimizing Your 403(b) Plan: New Changes and Guidelines for Employees & Retirees

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  1. INVEST 403(b) Plan

  2. Our Current Plan 10.5% + 10.5% + 10.5% +

  3. Current Plan Assets • Vanguard Individual Custodial Account • TIAA-CREF Individual Custodial Account $29,916,976 • Fidelity Institutional Account Accounts: $53,991,103 Traditional $33,737,699 Annuity: $3,415,884 TOTAL: $121,061,662 *600 Active Employees; 480 Retirees

  4. How are you currently paying fees and expenses? • Hope contributes 10.5% • Any voluntary contributions • Vendor takes expenses from your account before reporting gains or losses. Expense ratios are calculated as a “Basis Point” (not on your statement) • Record-keeping fees (on your statement) 10.5% +

  5. Definition BASIS POINT (or Expense Ratio) A Basis Point is a measure used for describing interest rates, and is equal to one hundredth of a percentage point (.01%) Example: $100,000 balance with expense ratio charged at 40 basis points (.4%): $100,000 x .004 = $400 in expenses

  6. Why make changes? New federal rules were issued in 2007 to bring 403(b) plans into compliance with 401(k) plans. • ERISA -Employee Retirement Income Security Act • Plan Documents • Audit (2 years completed) • Form 5500 • Fee Disclosures • Discrimination Testing -2 Tiers (1 year waiting period)

  7. Final Requirements • Creation of the Investment Policy & Committee • Evaluation of the Employer Fiduciary Responsibility • Hope must evaluate performance of the funds and open and close funds based on performance • Most 401(k) or 403(b) plans have on average less than 15 funds • Hope currently has over 300 funds

  8. Process: Step 1 Evaluate Our Current Funds

  9. Process: Step 1 26 39 259

  10. Process: Step 2 Create an Investment Policy & Investment Committee • Determine Investment Committee • Create Investment Policy by selecting fund categories that the Plan will invest in (Small Cap, Large Blend, Real Estate, etc.) • Set Plan goals: • Get Institutional Shares for lower expenses • Get a single Record-keeper

  11. Process: Step 3 Select Record-keeper Requests for Proposal (essentially, an offer to bid for our business) was sent to 5 companies: our 3 current vendors (TIAA-CREF, Vanguard, Fidelity) and 2 outside record-keepers (Transamerica and ING). From these RFPs, 2 companies became “finalists”:

  12. Process: Step 3 Select Record-keeper Both companies were interviewed and lists were compiled of some of the benefits and drawbacks of each company:

  13. Process: Step 3

  14. Process: Step 4 Campus Approval • FRAC (Financial Resources Advisory Committee) • PIC (Professional Interest Committee) • SAG (Staff Advisory Group) Selection:

  15. Our Current Plan 10.5% + 10.5% + 10.5% +

  16. New Plan 10.5% +

  17. Fees and Expenses going forward • Record-keeper Fees (in Basis Points) $0 – $70 million: 19 basis points $70-120 million: 14 basis points $120 million + 10 basis points • Plan Expense Fees (IBS expenses)

  18. Fees and Expenses going forward Example: • Fund Expenses and Revenue Sharing - Fund expenses and fees collected Revenue Sharing

  19. Fees and Expenses going forward Example: Revenue Sharing Fidelity sets a flat Basis Point Fund Expense for everyone. Let’s use 8 Basis Points for this example: 2 Basis Points

  20. Examples + + = = + +

  21. Examples + + = = + +

  22. Examples + + = - = + +

  23. What about annuities? • Standard Insurance Stable Value Fund -Guaranteed Income Fund • Secure Path for Life (must be age 50 or older) -Invests in Vanguard Target Funds -Can begin withdrawals at age 55 -Guaranteed minimum withdrawals

  24. Other Changes • Local advisor fees are no longer allowed to be paid from Plan assets • All voluntary contributions must be set as a percentage, not a fixed amount • Default fund-Target Date funds • Continued review of fund performance • Funds will move with changes

  25. What do you need to do? • Select new funds by September 1, 2013 • Meet with Transamerica one-on-one this summer • Use a local financial planner • Make the changes yourself • Between September 1 and October 1, move your existing funds

  26. Why should I move funds? • Lower institutional shares • One-stop record-keeping • Lower record-keeping fees • Personal review by a financial consultant • One fully inclusive retirement web tool

  27. Transferring Fund Balances • Vanguard – all funds will be required to be moved to the new plan; will work directly with Transamerica • Fidelity – requires all funds to be moved to the new plan; will work directly with Transamerica • TIAA-CREF –will require working with the company; will depend on type of investment

  28. What tools are available? • FAQ on Hope HR Office website • Communication will begin late spring/summer from Transamerica. Watch for mailings and/or emails for information • Information will be sent to you about setting up your one on one appointment with Transamerica

  29. Questions?

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